Business and Politics Mix Badly in California

By Chris Nolan |
Posted 2004-12-09

Business and Politics Mix Badly in California

It may hold the promise of curing a number of diseases, but Proposition 71, the California ballot initiative that will raise $3 billion to research the medical applications of human stem cells, is running into political trouble.

The travails the initiatives backers are encountering in the press and the state legislature are a good example of what happens when business folks, particularly ambitious and well-funded business folks, get involved in politics. The danger here is particularly acute since Prop. 71 backerswith the eyes of the nation on their workseem to be treating the ballot initiative like a funding round for a sure-to-be successful startup than a continuing project dependent on public good will.

Prop. 71, which will authorize the state to sell bonds to fund embryonic stem cell research in the Californias universities and medical research labs, was approved with a comfortable 59 percent of the vote. Within days of its passage, the measure was being hailed in the state and across the country for creating a new California gold rush for scientists. It has also triggered a rash of similar initiatives in other states with large universities.

The measures support was organized and backed by real estate developer Robert Klein and a collection of some of Silicon Valleys best-known venture capitalists, most notably the biotech powerhouse Kleiner Perkins Caufield & Byers. Prop. 71, was, not incidentally, billed as a rebuke to the Bush administrations decision to severely limit the use of embryonic stem cells in research. But charges of self-dealingfine in business, death in politicsare already thick.

The ballot initiative calls for the creation of the California Institute for Regenerative Medicine (likely to be located in the San Francisco Bay area) to oversee the grant-making process to universities and medical research facilities located in the state. The institutes work will, in turn, be reviewed by a 29-member citizens committee, and Klein is expected to be chosen to head the committee. The job requirements in the initiative, which begin by calling for a candidate with stem cell advocacy experience, all but spell out his name.

Other concerns about the disbursement of the enormous sum the initiative will raise$295 million a yearhave picked up as the committee has begun its work. California Sen. Deborah Ortiz, who supported Prop. 71, has introduced legislation to have members of the oversight committee subject to Californias financial disclosure laws. The idea is to let taxpayers know whether members have any financial interest in concerns that might profit from the institutes work. She is also asking that the benefits that might arise from the institutes reliance on state-backed bondsnew medical practices or cures as well as royalties from patents and other discoveriesbe returned more directly to the state treasury and its residents.

Bulletproof Legislation

Although Klein has said his goal is to take politics out of the research grant-making process, he and Prop. 71s other backers clearly know thats almost impossible. Theyve formed an adjunct organization, the California Research and Cures Coalition, to do their political work, which they describe as "educating opinion leaders, elected officials and policy makers, medical professionals, media and the general public." Of course, it doesnt hurt that the initiative contains wording effectively banning changes in how it operates for at least three years. Ortiz can drop all the bills she wants, but the legislation is unlikely to go anywhere.

Klein, surprisingly, has criticized Ortizs legislation. And to make matters worse, the oversight committee and the coalition formed to support its work have shown signs of giving short shrift to the political nominees by not including them in some scheduled meetings. The groups willingness to have closed-door meetings isnt going down well. And, getting phone calls returned isnt easy, either.

The best course here is the one that pours oil on troubled waters. Committee appointees might not like having their financial records open to scrutiny but some sort of disclosure is probably in order. Making meetingsor records of meetingsopen to the public might be a safer strategy than shutting the door and letting critics rely on disgruntled or dissatisfied grant applicants for accounts of what goes on.

If Prop. 71 comes to be seen, rightly or wrongly, as a private industry boondoggle it wont just hurt the research efforts the measures backers hope to fund, it will give the measures criticsin California and across the nationlegitimate grounds for complaint.

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